Execution trimmed due to pending appointed dates for fiscal 2019

CRISIL Research has lowered its execution forecast in National Highways Authority of India (NHAI) projects for fiscal 2019 to 3,600 – 3,800 km from earlier anticipated 4,300 km. We estimate around 800 km of execution is at risk this fiscal because many hybrid annuity model (HAM) projects are still awaiting appointed dates seven months after they were awarded.

Appointed date is the de facto starting date of a project, when the NHAI hands over its contract letter to a developer or concessionaire.

CRISIL Research analysed 40 HAM projects amounting to 1,913 km (over 55% of total HAM awarding that year), awarded by NHAI in fiscal 2018. In all, 3,400 km of HAM projects were awarded last fiscal. Our analysis indicates many have achieved financial closure, but most of them are still awaiting appointed dates on account of delays in land acquisition or regulatory clearances.

Our interactions with stakeholders indicate land acquisition for most of the projects awarded is in the advanced stages, but lenders would begin disbursements only after the mandatory 80% land is in at least the 3G stage. Some projects could receive their appointed dates next month, while some others are yet to achieve financial closure.

The situation in projects awarded under the engineering, procurement, construction (EPC) model is better than HAM. Typically, land acquisition is higher in EPC than HAM because the NHAI gets additional 150 days’ buffer on account of time taken by developers for financial closure. A sample of EPC projects awarded last fiscal shows ~54% have started execution.